Top marks to David Willetts on financing student loans

The former universities minister deserves credit for trying to find a solution
to the burden of unpaid student debt

Student loans were intended to shift the burden of payment away from the taxpayer and on to the individual student. But what happens if the graduate never makes enough money to pay them off? The burden returns to the Treasury – and officials calculate that it is financing between 30p and 40p out of every £1 lent. What can be done?

David Willetts commissioned a report when he was universities minister that suggests universities could buy student debt. That way, they might work more closely with their students to ensure that they find employment quicker and with prospects of better remuneration. And it might also mean that universities benefit financially from the arrangement, while the taxpayers save money.

The idea could prove controversial. One concern will doubtless be that universities will want to increase the £9,000 cap on tuition fees in exchange for carrying more of the risk on recouping loans. Another is that there will be fewer incentives for those institutions to offer courses that do not have obvious earning potential. This would be no bad thing if it means the decline of vanity degrees of the “soap opera studies” variety. But it would be tragic if it meant fewer humanities courses being offered by institutions of quality. Yes, higher education should be a pathway to success for those who want to make money. But a significant, noble contingent wish to learn for the sake of it – to stretch the mind.

Nevertheless, Labour’s 50 per cent target for university admittance raised unrealistic hopes: too many young people became indebted having taken degrees that offered few prospects – with some cost passed on to the taxpayer. Mr Willetts deserves credit for trying to find a solution to this problem that preserves excellence while fostering aspiration.